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Thursday, March 19, 2015 - 06.00 GMT
CB maintains policy rates, expecting economic growth to continue

 

Central Bank has decided to maintain current policy interest rates as economy grew at a rate of 7.4 percent last year amid low inflation.

Accordingly, the Standing Deposit Facility Rate (Repurchase Rate) would remain at 6.50 percent while the Standing Lending Facility Rate (Reverse repurchase Rate) remains at 8.00 percent, the Central Bank announced Wednesday releasing the monetary policy review.

Statutory Reserve Ratio (SRR), the commercial banks' deposit requirement remains at 6.00 percent.

According to recently released data by the Department of Census and Statistics, the Sri Lankan economy, mainly supported by the expansion in the industry sector, is estimated to have grown by 7.4 percent in 2014 compared to 7.2 per cent in 2013.

The Industry sector grew by 11.4 percent and the Services sector grew by 6.5 percent last year while the Agriculture sector that was affected by adverse weather conditions, recorded a marginal growth of 0.3 percent.

"Going forward, the economy is expected to maintain its growth momentum in 2015 amidst sustained low and stable inflation and expected improvements in business confidence," the Central Bank said.

Reduction in fuel prices and prices of other essential items combined with improved supply conditions are expected to keep the headline inflation at low levels in 2015, particularly in the first half.

The external sector remains resilient with continued foreign currency inflows to the current account as well as to the financial account of the Balance of Payments (BOP).

During the remainder of 2015, the external sector is projected to strengthen further with the expected reduction in expenditure on imports together with higher inflows on account of tourism and workers' remittances as well as receipts to the government, the banking sector and other private corporates.

Credit obtained by the private sector from commercial banks increased by 11.5 percent, year-on-year, in January 2015.

Credit to the private sector from commercial banks is expected to sustain its growth momentum in the period ahead benefiting from low market interest rates and increased business confidence.

Given signs of sustained increase in credit flows to the private sector, the Central Bank has removed the restriction placed on the access to its Standing Deposit Facility (SDF) by OMO participants with effect from 02 March 2015.

Considering the developments in the economy, the Monetary Board at its meeting held on 17 March 2015, was of the view that the current monetary policy stance is appropriate.

 

 

 

 
 
   
   
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Last modified: March 19, 2015.

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